Problem 12-10A Prepare a Statement of Cash Flows; Free Cash Flow [LO12-1, LO12-2, LO12-3]

Joyner Companys income statement for Year 2 follows:

Sales	$	707,000
Cost of goods sold		386,000
Gross margin		321,000
Selling and administrative expenses		218,000
Net operating income		103,000
Gain on sale of equipment		9,000
Income before taxes		112,000
Income taxes		33,600
Net income	$	78,400

Its balance sheet amounts at the end of Years 1 and 2 are as follows:

	Year 2		Year 1
Assets
Cash	$	22,400	$	67,600
Accounts receivable		265,000		144,000
Inventory		318,000		279,000
Prepaid expenses		10,000		20,000
Total current assets		615,400		510,600
Property, plant, and equipment		625,000		503,000
Less accumulated depreciation		166,800		131,000
Net property, plant, and equipment		458,200		372,000
Loan to Hymans Company		43,000		0
Total assets	$	1,116,600	$	882,600
Liabilities and Stockholders' Equity
Accounts payable	$	318,000	$	261,000
Accrued liabilities		43,000		59,000
Income taxes payable		84,000		80,600
Total current liabilities		445,000		400,600
Bonds payable		192,000		107,000
Total liabilities		637,000		507,600
Common stock		336,000		279,000
Retained earnings		143,600		96,000
Total stockholders' equity		479,600		375,000
Total liabilities and stockholders' equity	$	1,116,600	$	882,600

Equipment that had cost $31,000 and on which there was accumulated depreciation of $10,500 was sold during Year 2 for $29,500. The company declared and paid a cash dividend during Year 2. It did not retire any bonds or repurchase any of its own stock.

Required:
1.	Using the indirect method, compute the net cash for operating activities for Year 2. (Negative amount should be indicated by a minus sign.)

2.	Prepare a statement of cash flows for Year 2. (List any deduction in cash and cash outflows as negative amounts.)

3.	Compute the free cash flow for Year 2. (Negative amount should be indicated by a minus sign.)